1. 1 BIOFUELS FROM A FOOD INDUSTRY PERSPECTIVE Willem-Jan Laan European Director External Affairs Unilever N.V.

2. 2 Financial Times – 7 September 2007

3. 3 EU BIODIESEL 2007 Biodiesel production capacity 200710.2 mln tonnes Biodiesel production 2007 6-6.7 mln tonnes Rapeseed oil used for biodiesel 5.0 mln tonnes Other use of rapeseed oil 2.82 mln tonnes EU rapeseed production 17.4 mln tonnes EU rapeseed oil production 7.26 mln tonnes Biodiesel production increase higher than domestic oilseed production increase The EU will be dependent on imports from third countries

4. 4 EU: RAPE-OIL FOR BIODIESEL AS % OF EU RAPE-OIL CROP

5. 5 EU SEED OIL IMPORTS (MLN TONNES) 20062020 – 10% WITH 2 ND GENERATION 2020 – 10% WITHOUT 2 ND GENERATION 2000 4.6 9.9 13.6 17.5 18.1 22 PARADIGM SHIFT

6. 6 EXPORTS E.U. GRAIN IMPORTS (MLN tonnes) -10 18 32 2000 2006 2020 – 10% WITH 2 ND GENERATION 2020 – 10% WITHOUT 2 ND GENERATION IMPORTS

7. 7 AVAILABILITY OF RAW MATERIAL - 2020 EU Commission January ’07: l 18.8 mln t for bio-ethanol (13.42% of petrol market): 11.2 mln t wheat, 5.0 mln t straw, 1.5 mln t maize and 0.8 mln t sugar; 0.3 mln t imports of ethanol l 9.7 mln t for first generation biodiesel (5.7% of the diesel market): 4.7 mln t domestic rape, 2.6 mln t soy imports and 2.4 mln t rape imports l 2.5 mln t for second generation biodiesel

8. 8 PRICE IMPACT OF EU BIOFUELS PROGRAMME No biofuel use (EU Commission* ; €/t) 2020 (EU Commission*; €/t) Expected price increase (%) Common Wheat 114123-1318-15 Rape oil332672-737102-122 Soy oil330693-745110-126 Rape meal15869-63 -/- 56 - -/- 60 Soy meal202119-104 -/- 41 - -/- 49 * Source: EU Biofuels Progress Report (Jan. ’07); Annex Aug. 2007 (€/t) 234 715 664 166 232

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11. 11 Forecasts for food consumption growth – primarily in China, India and other D&E countries (OECD-FAO, 2006)  In 20 years an extra 50% food production is needed !  Without agricultural intensification this will require an additional 2.5 billion ha of land (e.g. 2/3 of the current forest area!) 6

12. 12 150 Mn T 14

13. 13 THE IMPACT ON THE FOOD INDUSTRY l Competition for acreage food-feed-fuel wheat-corn-oilseeds l Agricultural production limitations (incl. rotation) l Demand increase for food/feed in the coming years l Second generation biofuel is not commercially available yet  Additional price inflation (agflation)

14. 14 THE IMPACT ON THE FOOD INDUSTRY l Increased cost of raw material l Increased volatility: low stocks to use ratios l Will see higher consumer prices depending on product category l Food Industry will be dependent on the bio-energy policy l Food security will be a priority policy objective in several developing countries (India, China, Indonesia)

15. 15 AVOIDED CARBON EMISSIONS Ref.: School of Earth and Environment, University of Leeds, UK

16. 16 SUSTAINABILITY ISSUES l Effectiveness to achieve GHG-emission reduction and dependency on fossil fuels. We believe previous land use should be included. Biofuels that do not deliver a minimum saving of 50% should not be included in subsidised programmes, nor should they be labelled as sustainable l Competition with food crops should be avoided, at local and regional level. The fuel dollar of the rich should not compete with the food dollar of the poor l Biodiversity loss should be avoided: no expansion of crops in fragile habitats

17. 17 INCREASING BIOFUELS PRODUCTION - KEY CONCERNS l The availability of raw materials l The (unintended) consequences on global food security have not been included in most biofuels support programmes. Prices of several crops have doubled recently. What will happen with the further expansion of the biofuels industry? l Do we choose the right biofuels? We support bio-energy applications that have proven well-to-wheel sustainability and energy efficiency performance. We must discourage the use of environmentally, socially and economic harmful biofuels l Environmental impact (GHG-emissions, eco-systems) could become negative if the biofuels boom results in deforestation or the transition of grasslands

18. 18 Source: Oil World

19. 19 Source: Oil World

20. 20 Source: Oil World

21. 21 Source: Oil World

22. 22 CRUDE MINERAL OILS VS. VEGETABLE OILS PRICES Source : Mintec Datagain Info UK

23. 23 GERMANY l Biodiesel production 2006 2,662 mln tonnes l Rapeseed production 2006/075,340 mln tonnes * Rapeseed oil production 2.3 mln tonnes l Increase in biodiesel production higher than domestic oilseeds production increase l Germany will be dependent on imports of raw material for food/feed, biodiesel and other uses

24. 24 EU-27 BIO-DIESEL PRODUCTION * Other oils estimated at 20% in 2005/06 and before, rising to 30% already by 2007/08 until 2009/10, and then rising steadily further to 35% by 2019/20 ** Basis oil yield 43% *** Basis: heating value of diesel: 43 mj/kg, heating value of bio-diesel: 37 mj/kg

25. 25 <> Source: Oil World

26. 26 <> Source: Oil World

27. 27 SUPPLY & DEMAND BALANCE GRAINS Millions of MT2006 situation 2020 - 10% achieved share of 20% of 2nd gen. Without 2nd gen. Gasoline consumption (Mln t)109140 Ethanol demand (Mln t)1.218.022.5 Grains demand: Ethanol2.456.570.6 Food & Others98.9109.2 Feed Demand165.6167.5 Total Grain Demand267333347 EU Production Grains277315 Net Balance (Exports-Imports)10-18-32 Total net balance swing -28-42 12% of total demand

28. 28 BIOFUELS SUPPORT l Subsidies, including the energy premium l Tax exemptions l Mandatory obligations (blending, use) l Fuel quality requirements  Instruments have created distortions in the markets. The fuel demand has to be met, regardless of the price level  In certain markets the Fuel Industry has bypassed the Food Industry as lead buyer

29. 29 CONCLUSIONS l EU-27 will become a large net importer of grains, oilseeds and vegetable oils l The net contribution to GHG-reduction in the biofuels area is limited (3% of transport emissions with first generation biofuels). If we have to turn grassland or forests into arable land, the balance will become negative l Current support measures for biofuels - will create inflation - do not distinguish between good performing and poor performing biofuels l The targets for biodiesel and bio-ethanol should take into account the availability of second generation biofuels and the sustainability of the biofuel feedstocks